On Monday, July 23rd, the oil price dropped to $89 a barrel due to increasing concerns over Europe’s debt crisis and the Chinese Economy.
This morning the benchmark crude futures contract for September delivery dropped $2.55 at $89.28 a barrel in electronic trading on the New York Mercantile Exchange, while the August contract ended down $1.22 at $91.44 per barrel in New York. On the ICE futures exchange in London brent crude was down $2.76 at $104.07 a barrel.
European financial markets were affected by as the government borrowing rates of Spain and Italy increased drastically on concerns they will need sovereign bailouts. Spain’s borrowing rate over the next 10 years approached 7.5%, a level considered high for the last few months. Europe’s fight with the debt crisis has thrown about a third of the 17 euro countries into recession, ending demand for oil and energy products.
Friday, July 20th, Spain predicted the recession will affect next year too and Valencia already announced it needs help from the government to be able to pay its bills. An adviser to China’s central bank estimated that the Chinese economy will slow further in the third quarter.